Why Easyjet is a ‘buy’ for medium risk investors

Otmane El Rhazi from Mindful Money » Shares.

Ian Forrest, investment research analyst at The Share Centre, has highlighted Easyjet as his share of the week. He explains below why he is backing the discount carrier…

After reporting its first ever pre-tax profit at the interim stage in May, and with the shares still looking good value, Easyjet is our share of the week. The low cost airline moved from a loss of £53m in the first half of last year to a profit of £7m, with profits driven higher by the introduction of allocated seating for customers, amongst other competitive edges.

However, May’s good news for the group was also accompanied by a lowering of expectations for the second half due to a recent strike in France and higher regulatory fees in some of its markets. The shares dropped following these results although investors should note that this may have been driven by short term concerns.

Easyjet’s prospective dividend yield has risen to 3.5%, one of the best in its sector, and investors should be aware that this may be supported further by lower fuel costs due to the oil price remaining at low levels. This, combined with a new strategy, growing capacity and an effective management team supports our recommendation for investors to ‘buy’ into Easyjet.

We believe that these shares are for the medium risk investor looking to achieve a balanced portfolio.